PS3 Optical Output and Possible Receiver Problem

[GQSioux]

I have a frustrating problem that I think I have resolved but first I want to make sure I have my info straight and that I am not being jipped of some sound quality.

I have my PS3 connected to my Panasonic SC-PT670 surround sound system via optical. From what I gather, setting the PS3 optical output set to BITSTREAM is best when using Optical. After setting up my new Panasonic sound system I of course did a test. Dolby Digital sounds absolutely amazing!! Just to be sure, I switched to Linear PCM and tried a BluRay with Dolby 5.1, and while it sounded good, it wasnt as strong. It had to be turned up about 5 notches in volume to sound similar to what I got with bitstream. So my conclusion there, Bitstream all the way.

Things struck a blow when I tried DTS (keep in mind I'm still set to Bitstream). I switched to the DTS soundtrack of "Terminator 2" and there was zero sound. Turns out the Panasonic PT670, even though it says it can decode DTS, CANNOT decode DTS from an external source via optical! It only decodes DTS when you use it's built in DVD player. VERY misleading. I felt super jipped. I thought all hope was lost until I tried one other thing. In the book, it says it can only decode Dolby and PCM via optical, soooo, I switched PS#'s optical out setting to Linear PCM, and guess what? Sound came out of my Panasonic sound system with DTS! Not as powerful as the Dolby with Bitstream, but it was working (fyi: there was no DTS logo showing up on the receiver). So basically, my sound system will only let me hear a Blu-Ray with DTS while on Linear PCM. So the conclusion to my set up is, leave it on bitstream and try to use Dolby when I can. Sadly, not all Blu-rays come with Dolby, some are strictly DTS like The Bourne series and My Bloody Valentine 3-D. If I ever encounter a DTS only Blu-ray, I guess I have to switch my PS3 optical out setting back to Linear PCM. So that is my final question I'm hoping someone hear can tell me before I take back my Panasonic sound system. Obviously, toggling back and forth between bitstream and Linear is a minor pain and since my receiver can't decode DTS, I have no choice. When I switch to linear PCM for DTS Blu-rays, is what I am hearing a major step down in quality? It is not true DTS since no DTS logo is registering on the receiver? It doesnt sound bad to me, its just that I do have to turn the volume up slightly more than I would with Dolby/Bitstream.